Dallas, Denver, San Francisco Real Estate Markets Leading in Home Price Index

According to a recent report, home prices in the Dallas, Denver and San Francisco real estate markets have risen sharply over the last year or so, outpacing national trends.

House values in the U.S. are still rising, year over year, according to the latest release of the S&P/Case-Shiller National Home Price Index. This long-running and widely cited index tracks prices in all nine U.S. census divisions. The latest report showed a 4.5% increase in U.S. home values, from June 2014 to June 2015.

But the annual gains were much larger in some cities. The real estate markets of Dallas, Denver and San Francisco experienced the biggest jump in house values, according to the Case-Shiller Index.

The authors pointed out that “Denver, San Francisco, and Dallas reported the highest year-over-year gains among the 20 cities with price increases of 10.2%, 9.5%, and 8.2%, respectively.”

So why are these three housing markets outpacing the nation, in terms of annual home-price gains? As usual, it has to do with supply and demand. Here’s a look at current real estate conditions in Dallas, Denver and San Francisco, as of August 2015.

Dallas Still One of the Hottest Real Estate Markets

Home prices in Dallas and Denver returned to pre-crisis levels back in 2013. And they’re still rising steadily to this day. The Dallas real estate market is experiencing a very high level of demand right now, due to a strong local economy and other factors.

But there aren’t enough homes on the market to meet the current level of demand in this market. A recent report from Realtor.com showed a -21% decline in the total number of home listings in the metro area, over the last year or so.

As a result of this imbalance, home prices are rising and houses are selling fast — almost twice as fast as the national average. Perhaps that’s why Realtor.com recently ranked the Dallas real estate market as one of the hottest in the country.

According to the Case-Shiller Index, home prices in Dallas rose 8.2% from June 2014 to June 2015.

Denver Home Prices Rise Due to Inventory Crunch

The Denver real estate market has been in the news a lot lately as well, particularly where home prices are concerned. The Realtor.com “hotness” ranking mentioned above also put Denver in the top ten. According to the Realtor group, the Mile High City had the second-hottest housing market during the month of July.

Here again, inventory shortage is a major factor. A recent study by the real estate information service Zillow found that Denver had 16.6% fewer homes for sale in June 2015 compared to a year earlier. That was across the pricing spectrum. When you drill down to the lower-priced home category (where most first-time buyers tend to shop), the year-over-year inventory decline was even greater at -38.7%.

According to Zillow’s economic team:

“As home values continue to rise, buyers are faced with more challenges in a tighter market, especially in hot markets like Denver, which saw the highest home value appreciation from last year, surpassing even San Jose and San Francisco.”

The inventory situation, combined with increased demand from buyers, has led to a rapid rise in home prices for the Denver metro area. But there’s a chance this red-hot market could begin cooling over the coming months.

According to Case-Shiller, house values in Denver rose 10.2% in June 2015 compared to last year.

San Francisco Suffers Shortage of Affordable Housing

Everyone knows San Francisco is an expensive housing market. Consider the evidence: According to the real estate firm Redfin, the city’s median home price rose 15% in July (year over year) to land at $1.15 million. So yes, it’s pricey.

But when only 10% of a city’s population can afford to buy a median priced home, you have a problem.

That’s the current situation in the San Francisco real estate market. In its latest “Housing Affordability Index,” the California Association of Realtors (CAR) revealed that only 10% of San Francisco households could afford to buy a median-priced house within the city, during the second quarter of 2015. That was the lowest affordability rating of any metro area in the state of California, and well below state and national averages (30% and 57%, respectively).

So the last thing home buyers in San Francisco want to hear about are additional price hikes. Unfortunately, that’s exactly what is happening right now. According to the latest Case-Shiller data, home prices in the city rose 9.5% over the last 12-month reporting period.